Informed Consumer

What do I need to know before I buy an insurance plan to replace my income if I get hurt or sick and can’t work?

1.    Will I be refused if I already have a medical condition?

It depends on what the condition is and how it affects your health and lifestyle. Many conditions like high blood pressure, controlled by medication are acceptable

If you have a medical condition that does cause you to be declined, Guaranteed Issue Critical Illness is an option. Look for Income Replacement Plans that offers injury/accident sold by itself. Most people and occupations qualify for injury/accident coverage to guarantee income benefits if they cannot work.


2.    What does an Accident Policy Cover?

Be mindful of the wording in the accident policy. Most accident policies require you have an Accident before it will pay a benefit.

Choose a plan that includes injuries that are not directly caused by an accident, but are the result of repetitive motion, like tendonitis, bursitis, carpal tunnel syndrome, etc. which still prevent you from working in many occupations like truck driving.

Look for “soft tissue” limitations. Make sure you understand how many days, weeks or months you will be paid when the injury is “strains and sprains”; injuries to muscles, ligaments or tendons.


3.    How much benefit should I get?

Look carefully at how much benefit you are entitled. Is the policy based on Net Taxable Income or a more generous approach for self-employed people that uses a Gross Revenue calculation?

More important: Is the method of calculating your income benefit when you apply for the coverage, the same calculation used to determine your benefit at the time you claim?

Some contracts are issued with the more generous calculation based on your total Gross Revenue but pay the benefit on evidence of Taxable Income. It can be a significant difference.


4.    Do you own the policy or are you a member of an employee group, association or organization and therefore a certificate holder?

As the owner of the plan, you control your destiny. It is a unilateral contract once issued and accepted by you. It will terminate if you fail to pay the premium or, satisfy the terms of the contract which you accepted upon issue. No surprises!

As a certificate holder with a group or association policy, if you leave the group or no longer belong to the association, your coverage terminates. In rare instances the insurance might be portable, with conditions.

Premiums generally increase annually with group/association coverage as rates are affected by claims made and age changes.

Choose a plan with a level premium for the lifetime of the contract.

Determine what premium suits your budget and lifestyle and be prepared to review your plan annually, if only to confirm it still meets current needs.


5.    What else do I need to know about things that might influence the amount of benefits paid?

          • Look for “integration” clauses. Will your plan reduce the benefit you get if you receive benefits from any government or other source?
          • Does the plan “cap” the amount of benefit allocated for specific services. If so, is the overall amount reasonable?
          • Does the benefit have a “lifetime” maximum and is it reasonable (in your opinion)?
          • Does the plan contain a “renewable” feature for medical and paramedical goods and services, so that when you return to active work the plan refreshes the benefit for future claims?


6.    How long will I be paid?

Understand the wording for the length of time the claim benefit will be paid. Some contracts say, “payable to age 65”, but in fact it means it can be paid to age 65, but the real payment period for the benefit is much less, 2 years or 5 years for example. Also note a change in the wording that determines what “disability” means after a certain payment period. You may find you are no longer “disabled” and therefore ineligible to continue to receive benefits.

Does your plan protect you in YOUR occupation or just “any” occupation?


7.    What happens if I can go back to my occupation but only part time?

Can you return to work gradually – does your plan have a partial disability clause that will pay a significant portion of your lost income while you return fulltime? If so, what percentage and for how long?

Can “partial” benefits start at the same time as the full benefit or does the plan require you to be “totally disabled” for a period of time before “partial” benefits are available?What if I have a claim on my automobile policy?

Is your plan “1st payor” or will you lose benefits because you claim against your automobile benefits insurance (bodily injury)?

Note: an “auto” policy includes any insured vehicle; snowmobiles, farm tractors, etc.


8.    What is the value of my plan?

Is your plan structured as an “aggregate benefit” plan? Is there a maximum benefit (e.g. $300,000, $500,000) that all benefits paid are charged against?

How long will it pay (number of months) and what happens when the time or money runs out?


9.    After a claim, do I have to reapply, or is the claim condition now excluded from my plan?

The plan should remain as it was before the claim was made. No condition should be excluded because a claim was made.


10.Does your plan renew itself in full, at the same premium, when you return to active work following a claim?

The plan should be renewable when the claim is satisfied, and at the same terms and conditions that existed before you made the claim. You should simply begin paying the premium assuming the premium had been waived during the claim paying period.


11.Does the premium for your plan increase because you made a claim?

You should not have any change in the cost of your plan because you made a claim.


12.Does your plan terminate because you made a significant claim?

Claims should never cause cancelation of a plan. A plan can terminate when the contract terms are fulfilled (i.e. number of months of benefits, termination age, etc.)


13.Can the insurance company cancel your plan without your consent or agreement? What circumstances exist that would give rise to cancelation?

You should never buy a policy designed to deliver possibly years after you purchased that could be cancelled by the insurer. You need to control ownership. You might have developed a medical condition in the intervening years that deems you uninsurable. A Guaranteed Renewable plan cannot make any changes in the contract because your medical condition changed while the policy is in force other than any waiver of restriction in the contract terms which you agreed to and accepted when the policy was issued to you.


14.Can the insurance company increase/decrease the rates for your insurance plan? What are the conditions that apply if the answer is yes?

This isn’t always a bad thing, you just need to know and understand.


E&OE declaration

The foregoing is for guidelines only. There are so many products on the market that provide benefits only in depth consultation with a licensed insurance broker who represents a large number of insurers and can give you comparisons of offerings that best suit your personal needs and pocketbook.

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